Picasso separates the finance haves from have-nots

Pablo Picasso was never called a financier. But the Spanish artist can now claim to teach a financial lesson. The $106.5 million sale of his “Nude, Green Leaves and Bust,” a record price for the one-day masterpiece, underlines the disparate fortunes of the financial and the real economy.

Though Christie’s did not reveal the painting’s buyer, it was almost certainly an oligarch or hedge fund mogul. The auction house’s chief pointed to “depth of buying from Russia, China and the Middle East.” Christie’s brought in nearly 30 percent more than the bottom of its expectations from the New York sale of 56 artworks.

Moreover, the gaggle of emerging market heavyweights like Russia’s Roman Abramovich were said to be bidding against some of the hedge fund world’s most prolific collectors, including Citadel Investment founder Ken Griffin and Connecticut billionaire trader Steven Cohen. Although consumers in much of the world are still limping out of recession, the auction extravaganza is not all that surprising. The real world may still be licking its wounds, but the financial economy is in fine fettle.

Robust prices for financial assets may reflect easy money or hopes that the recent evidence of U.S. economic strength has entered into a sort of V-shaped recovery. But whatever the reason, junk bonds are back at par for the first time in three years and the S&P 500 index has gained nearly a third since last May’s art sales. Then, Sotheby’s fetched a quarter less than its pre-sale low estimates and failed to find buyers for a Picasso painting and a sculpture by Alberto Giacometti.

There were unsold pieces at Tuesday’s auction, suggesting that any bubble in the art market is concentrated around stars like Picasso. That too stands to reason, particularly in a period where currencies are perceived to be vulnerable to sovereign mishap or rising inflation. As financial theorists argue, specie backing for money does not have to have any intrinsic value, just a shared appreciation. And so the global financial elite have found their store of value – in a nude mistress from Paris.

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Rob Cox helped establish Breakingviews in 2000 in London. From 2004 he spearheaded the firm's expansion in the United States and edited its American edition, including the daily Breakingviews columns in the New York Times and Wall Street Journal. Rob has worked as a financial journalist in London, Milan, New York, Washington, Chicago and Tokyo. Rob graduated from Columbia University’s Journalism School and the University of Vermont. Follow Rob on Twitter @rob1cox